EU-Mercosur free-trade pact supporters push for deal

Supporters of a free trade pact between the EU and the Mercosur states in South America, under negotiation for nearly 20 years, are seeking to swim against the current and secure a deal by the end of the year.

"At a moment when the Anglo-Saxon world is in retreat on both sides of the Atlantic (Shanghai: 600558.SS - news) ... we should take advantage of that opportunity to reinforce cross-Atlantic ties between the EU and Latin America," said former Spanish foreign minister Josep Pique in reference to Brexit and the election of Donald Trump as president of the United States.

The two events are seen as partially due to a rising tide of public opinion against free trade deals, but numerous agreements are still in the works.

With (Other OTC: WWTH - news) the free trade deal with Canada provisionally entering into force in September and an agreement in principle reached with Japan in July, the EU is now trying to reach a deal with the Mercosur states: Argentina, Brazil, Paraguay and Uruguay.

Given the size of the Brazilian and Argentine economies, the deal is estimated to be worth four times as much as the deal with Japan for the EU and would represent an important victory for supporters of multilateral trade deals.

Pique, speaking at a recent conference organised by the Sciences Po university in Paris, said the talks which first began 18 years ago have stalled in part due to Brazil and Argentina dragging their feet.

"But now we have a window of opportunity given the political circumstances in these two countries," said Pique, noting that Argentina's President Mauricio Macri and his Brazilian counterpart Michel Temer now look positively on the pact.

With elections due next year in Brazil, the push by the trade pact's supporters recalls the efforts by those who pressed for the rapid completion of the pact with the United States before Barack Obama left the White House.

After the latest round of negotiations was completed on November 10 in Brasilia, the EU said a deal was at hand.

Holding his index finger and thumb just slightly apart, Jyrki Katainen, an EU Commission vice president, said: "We're that close to having a new association and trade agreement between EU and Mercosur."

The next round of negotiations is scheduled for the end of the month in Brussels.

- A deal by the WTO? -

Argentina's former foreign minister, Susana Malcorra, who will preside over the WTO's ministerial meeting, set to take place in Buenos Aires on December 10-13, hopes the EU and Mercosur will be able to reach a preliminary agreement at the session.

"In a context where global trade has been called into question, it is fundamental that two such considerable markets announce they are ready" to seal a new deal, Malcorra told AFP.

She (Munich: SOQ.MU - news) insisted it was not "a response to anyone", especially not the US president.

Trump threw a massive spanner into the works to extend multilateral trade deals when he pulled the US out of the Trans-Pacific Partnership (TPP), an attempt to create the world's largest and most comprehensive free trade deal, embracing economies representing 40 percent of global GDP.

He has threatened to do the same with the North American Free Trade Agreement (NAFTA).

Against this background, an EU-Mercosur deal "will be a political symbol", said Malcorra, adding that the announcement of "concrete decisions" was needed to counter the growing protectionist trend and public opinion against trade deals.

The EU has previously signalled it is ready to make concessions with Mercosur on beef and ethanol in exchange for more market share for its cars in order to reach a deal.

It still needs to overcome the reticence of France, however, and Katainen recently tried to assuage the fears of Paris.

"According to our calculations and figures, France is one of the the biggest beneficiaries of the eventual agreement," he said this past week in Brussels.

"It provides opportunities to French industry and also to the agricultural sector," he added.

For the Mercosur countries, the deal offers another advantage: it will permit them "to balance their economic relations and be less dependent on China," said Christian Daude, a Uruguayan who is the head of socio-economic relations at Latin America's development bank, CAF (Madrid: CAF.MC - news) .

"It would be risky for the economic stability of the region to have a concentration of investments and one trade partner, if something happens one day with China," he said.